Wal-Mart Delivery Service Says to Amazon: 'Bring It'

In its latest bid to take on Internet powerhouse Amazon.com Inc. this holiday season, Wal-Mart Stores Inc. is promising same-day delivery in some cities for orders placed online.

Wal-Mart, aiming to take on Amazon, is offering same-day delivery. The retailer began testing the new service in select cities last week and says it will cost $10 regardless of the size of the order. (Photo: Getty Images)

Called Wal-Mart To Go, the service costs $10 regardless of the size of the order. The products will be shipped from the company's stores, not from a warehouse or distribution center. Wal-Mart began testing the same-day service last week in Philadelphia and northern Virginia.

It added Minneapolis on Tuesday and will add San Jose and San Francisco later this month. The trial will last through the holidays.

Over the past several years, Wal-Mart has launched several attacks on its online rival, including a price war over best-selling books three years ago.

This time, Wal-Mart is betting that its network of thousands of stores, combined with an improved online presence and strong financials, can help it compete head to head with Amazon, which has increasingly stressed fast, free or low-cost deliveries. Amazon launched same-day shipping in 10 cities in 2009.

But shipping from stores, rather than from warehouses as Amazon does, is expensive, analysts said.

"It can be three to four times the cost for the retailer to pick items and pack them from a store versus having a really efficient, automated process back in a distribution center," said Al Sambar, a retail strategist at consulting firm Kurt Salmon.

"It's setting up to be an interesting ballgame between Amazon and Wal-Mart," said Wells Fargo analyst Matt Nemer. Wal-Mart has the scale of nearly 4,000 stores across the U.S. and billions of dollars in free cash flow, but Amazon is nimbler and has years of customer data at its disposal, he said.

Wal-Mart doesn't disclose its online sales, but the trade publication Internet Retailer estimates they were $4.9 billion, or about 1% of the company's total revenue last year, compared with Amazon.com's $34 billion in online sales.

Wal-Mart has been ramping up its e-commerce business, which employs 1,000 workers in San Bruno, Calif., down the street from YouTube's offices and far removed from the retailer's headquarters in Bentonville, Ark.

The retail giant has acquired nearly a dozen start-ups to help broaden its online presence and developed @Walmart Labs, its Silicon Valley tech shop that has revamped the walmart.com website and mobile applications to make them more competitive with Amazon and other online retailers.

Wal-Mart also has been trying to compete with Amazon's prices inside its stores. In some, it has quietly begun matching the online retailer's prices when customers ask, a practice historically done only against local brick-and-mortar competitors.

Nathan Engels, a blogger in Cincinnati, snagged a Cannon laser printer at Wal-Mart for $98 earlier this summer, even though the printer's advertised shelf price was $108. Wal-Mart lowered the price for Mr. Engels after he scanned the printer's bar code using Price Check, a smart phone application developed by Amazon, and showed a Wal-Mart customer service representative that the same printer was for sale on the Amazon website for $98.

"I can't imagine Wal-Mart makes a profit on this, but it does keep me in the store buying from them rather than Amazon," he said.

A Wal-Mart spokesman declined to comment on future policy, but said, "It's possible that an individual store may honor the price of an item online if a customer asks."

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Shopping carts outside a Walmart Express store in Chicago
Reuters

Wal-Mart also has been trying to use its stores to tap into millions of shoppers who either don't have credit or debit cards or don't feel comfortable disclosing their personal financial information online.

In April, the retailer began a program that allows customers to order merchandise online and pay for it at a store with cash. Shoppers can pick up the items at a store or have them delivered.

Nearly half of Wal-Mart's online sales now come from purchases customers make online and pick up at a store, said Wal-Mart spokesman Ravi Jariwala.

"We have a unique advantage because we have the national footprint of stores combined with our online site that enable programs like site to store, pay with cash or pick up today," he said.

A spokeswoman for Amazon declined to comment on Wal-Mart.

Instead of shipping goods from its distribution centers, Wal-Mart will pluck products from its network of stores in the four areas of the test program. The retailer wouldn't provide details on who would be picking and packing the products.

United Parcel Service Inc. will pick up the goods and deliver them to customers, who have until noon to place orders and can choose a four-hour window in the evening to receive deliveries.

Only about 5,000 items, such as televisions and toys, will be available for same-day shipping; the service doesn't apply to the millions of products available on Walmart.com.

It also doesn't cover grocery and produce items, except in California where Wal-Mart has been testing a grocery delivery service for the past couple of years and the program fees and order deadlines vary.

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